Six of America’s biggest banks are to participate in a year-long climate scenario analysis exercise, testing their ability to cope with hypothetical climate-related risks.
The climate scenario analysis exercise, on the other hand, is exploratory in nature and is designed to helps firms and supervisors in understanding how climate-related financial risks may manifest and differ from historical experience.
The banks under scrutiny are Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo.
Over the course of the pilot, participating firms will analyse the impact of the scenarios on specific portfolios and business strategies.
The Fed intends to publish results from the exercise, reflecting what has been learned about climate risk management practices and how the insights will help identify potential risks and promote risk management practices.
The pilot exercise will be launched in early 2023 and is expected to conclude around the end of the year.